Comment: On December 23rd, the President signed the Companies (Auditing and Accounting) Act into law. The Act, when commenced, will establish the Irish Auditing and Accounting Supervisory Authority (IAASA), writes Brian Walsh.

Among other things the IAASA will be responsible for supervising the regulation of the accountancy profession carried out by the recognised accountancy bodies, of which the Institute of Chartered Accountants in Ireland (ICAI) is one, and review the account of plcs and large private companies to ensure they comply with the Companies Acts, a function carried out in Britain by the Financial Reporting Review Panel.

The Act also contains a number of additional changes such as increasing the audit exemption threshold and imposing new procedures on directors and audit committees, thereby enhancing corporate governance.

The Act's origins lie in the report of the Review Group on Auditing (RGA) published in 2000 and it will put Ireland in the vanguard of countries with effective mechanisms for ensuring good corporate governance and supervising their auditing profession.

However, that does not mean we can rest on our laurels. Four years in bringing the RGA recommendations into law is a long time and has involved considerable energy from those involved. As a result, the IAASA, although not yet in existence on a statutory basis, already has a crowded agenda.

The past few weeks have seen Europe rocked by the Parmalat scandal in Italy. If a similar scandal were to occur in Ireland, it would fall to the IAASA to investigate directly or to oversee an investigation by the relevant accountancy body. The ICAI strongly recommended that work begin on developing the procedures and regulations necessary to allow IAASA to perform this task. It is essential that this work begin immediately.

Equally pressing is the issue of international accounting standards (IASs). IASs have been developed to ensure that company accounts are prepared in the same manner worldwide.

The European Commission has decided that these standards will have to be used for the fiscal year beginning January 2005 by listed companies preparing consolidated accounts. That decision also allows national governments to decide whether other types of company should be permitted (or even required) to use the new standards. This is an important decision for any company with a subsidiary that doesn't want to have to prepare its 2005 accounts using two sets of different standards.

The Government is yet to make that decision and awareness of the impending changes is low. Once a decision is made, considerable effort will be needed to communicate the arrangements to the business community.

The IAASA, as the key adviser to the Government on accounting issues, has a critical role to play here. But time is running out. Companies are obliged to "capture" financial information in accordance with IASs in 2004 for comparative purposes with 2005.

Another issue is how the IAASA will deal with its supervision of the disciplinary processes of the recognised accountancy bodies. During the Oireachtas debate on the Bill, Opposition deputies pointed out the inherent dangers for the IAASA if the public believed it was the first point of call for complaints about accountants.

It will surely be natural for people who wish to complain about the behaviour of an accountant to seek assistance from the State-backed body. But the IAASA is not equipped to carry out this function nor was it intended that it should do so. It urgently needs to agree a set of referral procedures with the recognised accountancy bodies whose processes are in place and have been approved by the Department of Enterprise, Trade and Employment.

The IAASA must also deal with the issue of self-styled "accountants" who do not fall within the scope of the Act because they are not members of a recognised body.

During the Oireachtas debate, the Government refused to accept amendments that would limit the use of the term accountant to those people regulated by the IAASA. The Act, by imposing further regulatory requirements on accountants in the recognised bodies, actually creates an incentive for people to leave these bodies, thereby avoiding the supervision of the IAASA without loss to themselves.

Members of the public who deal with self-styled accountants are left with no recourse if things go wrong, but it should not be allowed continue under the new supervisory structure.

Liaising with Government on issues such as auditor liability, limited liability partnerships and the harmonisation of reporting obligations being faced by accountants are all issues for the IAASA to consider.

The past three years have seen major accounting scandals in the US and now in Europe, and governments have moved to strengthen corporate governance and supervision of the auditing profession.

Ireland is well down the road in legislating against these potential difficulties. However, our competitive advantage will only be maintained if we coherently and consistently agree codes for the implementation of our legislative changes. The sooner the IAASA is put on a statutory basis the sooner we can start.

Brian Walsh is chief executive of the Institute of Chartered Accountants in Ireland